Shrugging off Fed’s Interest Rate Hike Campaign, Car Prices Resume Their Surge in Early 2023
Car market inflation driven by most expensive used vehicles segments like SUVs, up a staggering 8% in the past eight weeks
Chicago, IL – May 4, 2023 – Chaos is back in the used car market. While prices had finally started to drop towards normal late last year, this trend has abruptly reversed course. Inflationary pressure from new and used cars is back in early 2023, with new car prices setting records every month this year, and used car prices jumping by 5% in the past eight weeks alone, to an average of $31,951, according to new data from leading car shopping app CoPilot. Despite the Federal Reserve’s ongoing interest rate hike campaign, these price increases have largely been propelled by the most expensive vehicles in the market, including SUVs, which have surged in price by 8% (or $3,100) in just the past two months.
With consumer confidence still high, more affluent consumers remain willing to pay near record-high prices for some of the priciest vehicles on the market. For instance, within the SUV segment, the larger, more expensive makes and models have also shown the most substantial price increases. Full-size luxury SUVs have increased in price an astonishing 8% (or about $5,000) in the past eight weeks, while other full-size SUVs are up 10% (or about $4,000) in that same time period.
General Motors, one of the most popular SUV manufacturers under their GMC, Chevrolet, and Cadillac brands, has seen skyrocketing demand in recent months, with prices for their used SUVs up nearly 12% (or over $5,000) since February. With GM among the companies hardest hit by chip shortage issues, prices could remain elevated for some time as manufacturers struggle to replenish supply of new vehicles.
Similarly, the newest used car models (1-3 year old vehicles) are showing the most substantial price increases overall, up 4% (or $1,700) in the past two months to a near-record high price of $41,281. These cars will remain in short supply, as the reduced new car manufacturing and leasing since Covid is now reflected in used car trade-ins.
New cars continue to see surging demand and short supply in recent months; sales jumped by about 30% since October 2022, driving prices up by nearly nearly 5% (or $2,200) to a new all-time high of $50,916 in April.
“We’re now seeing a tale of two markets,” said Pat Ryan, Founder and CEO of CoPilot. “As the most expensive vehicles, like SUVs, surge in price, affluent consumers are showing they’re more than willing to pay, with sales levels remaining consistently high throughout the early part of this year. At the same time, interest rate hikes and banks tightening credit are making auto loans increasingly difficult to obtain for the average buyer. So demand for older, lower-priced vehicles has cooled, and both prices and sales of 4-7 year old and 8-13 year old cars have actually started to decrease in recent weeks.”
“However, the sky-high demand in the upper end of the car market is a clear signal that inflation is far from over,” Ryan added. “Since the Fed started raising interest rates in mid-2022, used cars are the only major durable good to start to fall in price, then reverse course and increase again in response to skyrocketing consumer demand. As the Fed considers whether to continue on its path of interest rate hikes, car prices raise a major red flag that its battle against inflation has yet to be won.”
Used electric vehicles (EVs), however, continue to be one of the few remaining favorable buys in the market. Spurred by price cuts in January to new models, used Tesla prices (now averaging $48,742) have fallen by 5% (or $2,700) as these impacts were felt throughout the market. Similarly, used electric vehicles have fallen in price by 5% (or $2,600), now averaging $46,060.
CoPilot is a leading, data-driven car buying app that provides consumers with an expert partner for high-consideration purchases, starting with car buying and ownership. The platform combines powerful data backed by human expertise to introduce transparency to the shopping, purchasing and ownership journey. The mobile application takes the time, frustration, and guesswork out of the process, empowering people to easily navigate the risks of shopping for high-value items, and to buy with confidence at the right price and the right time.
CoPilot provides free pricing tools for consumers. Price Pulse makes it easy for car shoppers to check the current market value and Price Premium for any car, track price changes, and compare years and models to choose the right car and know when to buy. For car owners and sellers, Price Pulse calculates the real-time value of their car, using the same data only dealers used to have, allowing consumers to track how much their vehicle has appreciated, so they can decide whether and when to sell, or negotiate the best deal at trade-in or lease-end.
For media publishers, CoPilot offers free, embeddable data tools, including Price Pulse market trends, allowing journalists and bloggers to integrate interactive charts and tables within their web content, apps, or newsletters, powered by CoPilot’s unique data and analytics.
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